Pantheon Doesn't Expect a Dramatic Shift In China Stimulus This Year.

Pantheon updates its views on the China stimulus outlook post Friday's new loan/aggregate finance data. Bottom line is that it expects continued targeted support to continue rather than a major policy shift.

• Pantheon: "The PBoC cut the RRR by 50bp on Monday, releasing RMB1T in liquidity just before the Lunar New Year holiday. A 10bp one-year LPR cut is likely in March, though today’s reasonably promising lending data adds to the case for delaying it until Q2. Policymakers are likely to hold the line in prioritising “high-quality” growth at the March Two Conferences, forgoing a major credit-driven stimulus, despite probably sticking to the “about 5%” GDP growth target. Further targeted support is likely, such as fiscal support for high-debt provinces and additional home purchase incentives, as well as local-level pilots such as household residence reform intended to restart urbanisation. But policymakers don’t appear yet ready to consider a major policy shift to address China’s structural issues of weak demand, headline consumer deflation, and insipid private sector vitality. Targeted support and muddling through is the most likely scenario."